China’s central government listed “boosting consumption…and stimulating domestic demand” as its first “major task” for 2025, at the recently closed “two sessions”.
As part of this focus – and amid slowing economic growth – the State Council made specific mention of China’s “two new” (两新) policy.
The policy was first announced in 2023, but was heavily promoted last year. President Xi Jinping reportedly “stressed the importance” of a national recycling company as part of the policy in 2024, because it “facilitates green, low-carbon and circular development”.
Carbon Brief explains what the policy is, how it works and what its impact will be. An abridged version of the article appeared in China Briefing on 20 March.
What is ‘two new’?
The “two new” policy is short for “large-scale equipment upgrades and trade-in of consumer goods”. It is designed to boost domestic demand to prop up growth, at the same time as improving the efficiency of equipment so as to lower emissions.
According to the Communist party’s leading magazine on ideology Qiushi, the idea was first raised in 2023 at an economic conference held by the State Council for “improving technology, energy consumption, emissions and other standards”.
It became well-known after Xi reiterated the idea in early 2024. In March 2024, the policy then became an “action plan – a document illustrating specific methods for executing a political goal.
Prof Bai Quan, director of energy transition at the Academy of Macroeconomic Research – a research institution under the direct supervision of the State Council – told Carbon Brief in 2024 that there are four aspects of “two new”:
- Updates to equipment such as large boilers, turbines, heat pumps and lighting used for manufacturing;
- Trade-in of consumer goods, including fridges and air conditioners;
- Recycling of old or high-emission items;
- Improving standards for product efficiency and emissions, as well as for recycling, “to prevent people from re-purchasing outdated equipment with low energy efficiency”.
He added that the first three aspects directly “promote carbon reduction” and the last one “indirectly serves energy saving and carbon reduction goals”.
Under the policy, government subsidies are provided for manufacturers and consumers to trade-in old inefficient goods and purchase new ones. Other financial and tax support is given to recyclers to increase recycling.
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In 2025, the State Council updated the “two new” policy and increased the funds available to consumers and businesses.
It also expanded the range of trade-in products, adding more and older petrol cars for instance, as well as pledging to release a more detailed trade-in standard covering 294 items by the end of the year.
Li Gang, an official from the Ministry of Commerce, is quoted by the state news agency Xinhua saying at the press conference on the expansion that it would “help stimulate consumer spending and boost domestic demand. All enterprises, domestic or foreign-funded, private or state-owned, are welcome to participate in the scheme.”
How does equipment upgrade work?
A fundamental mechanism of “two new” is providing funding that enables consumers and businesses to trade-in and upgrade goods, as well as recycling the old equipment.
For example, under the policy, a consumer can trade in an old, inefficient petrol car and receive subsidies to upgrade to a new electric vehicle (EV) instead.
The government “work report” delivered by premier Li Qiang at the “two sessions” says that “ultra-long special treasury bonds totaling 300bn yuan ($41bn) will be issued to support consumer goods trade-in programmes” in 2025.
Meanwhile, another 700bn yuan ($96bn) will be allocated for a sister programme, known as “two major [projects]” (两重), which supports infrastructure construction, including roads and railways.
In a more detailed “two new” paper, the State Council says it will provide about 90% of the funds and the rest shall be covered by local governments.
A sum of cash will be given when old “high-emission” goods, such as ships, trucks, tractors and buses, are sent for recycling, depending on the age and emission levels. Some discounts will also be given when purchasing new lower-emission replacements.
Separately, companies can apply for a low-interest loan for large-scale equipment upgrades.
The State Council paper also eases the rules around low-interest loans for equipment upgrades, making it easier for small and medium-sized enterprises to access them.
According to the paper, projects that can apply funds from the cash pool include “equipment renewal in the field, as well as energy conservation, carbon reduction and safety transformation in key industries”, such as transports and agriculture.
The policy also allocates around 7.5bn yuan ($1bn) for the “recycling and treatment of waste electrical and electronic products”. This extends beyond the list of trade-in items.
How does ‘two new’ support recycling?
As the world’s largest renewable energy producer, China has so far built some 1,408 gigawatts (GW) of wind and solar capacity. About 35m tonnes of waste from decommissioned wind and solar equipment will need to be recycled in China by 2030.
A research paper in the journal Waste Management suggests building up sufficient capacity to recycle this waste could generate “significant economic benefits”.
However, Shanghai-based outlet the Paper reports that only a limited number of recyclers are on the market, due to the high costs and long payback periods.
Despite Beijing issuing policies in 2023 and 2024 to encourage businesses, a stronger recycling market is needed for “advancing” the “two new”, according to prof Du Huanzheng, director of the Circular Economy Research Institute of Tongji University.
In 2024, a state-owned recycling company, China Resources Recycling Group, was established to handle scrap steel, EV batteries and decommissioned renewable energy equipment.
But “challenge[s]” remain for private recyclers, Bai told Carbon Brief. One obstacle is missing a “first receipt”, which is the purchase receipt from manufacturers that enables recyclers to claim value-added tax deductions, he said.
A supporting policy for the “two new” from 2024 allows qualified recyclers to use their purchasing invoice in place of “first receipt” for tax claims.
Bai said this policy “solved the problem” and “is a very important incentive to meet the 2027 goals” of the “two new” policy.
The 2027 goals, written by the State Council, include a 25% increase in new equipment investment across key sectors and a doubling in the share of cars being recycled:
“By 2027, the scale of equipment investment in industries such as industry, agriculture, construction, transportation…will increase by more than 25% compared with 2023; the energy efficiency of major energy-consuming equipment in key industries will basically reach the energy-saving level, and the proportion of production capacity with environmental protection performance reaching Class A will be greatly increased…The amount of scrapped cars recycled will increase by about one-fold compared with 2023.”
How does trade-in work under ‘two new’?
Li Shuo, director of China Climate Hub at the Asia Society Policy Institute (ASPI), tells Carbon Brief that this is not the first time China used subsidies and “similar initiatives” to “stimulate consumption, address product oversupply and enhance energy efficiency”.
In 2025, the categories of eligible trade-in goods under “two new” is expanding from eight to 12, including mobile phones and fridges that are closely related to daily usage. Up to 500 yuan ($70) subsidies apiece can be applied when purchasing new digital products from 2025.
Electric vehicles (EVs), which can greatly decarbonise road transport, remain on the list. In addition, scrappage subsidies have been extended to more and newer types of petrol cars – including cars registered from 2012-14 rather than 2011-2013.
Li adds that the latest expansion of the policy “highlights the rapid pace of industrial upgrades in China and the mutually reinforcing dynamics of industrial productivity, a favorable regulatory framework, and the sheer scale of the Chinese market”.
Bloomberg says that “the cash-for-clunkers program gave a big boost to sales – especially of EVs and hybrids – after its introduction last year” and “manufacturers and investors had been eagerly waiting to see whether the subsidy” would be renewed in 2025.
The buyer rebates for vehicles, including EVs and more efficient petrol cars, remain at the same level as in the second half of 2024, after a rise last August.
Buyers can receive up to 20,000 yuan ($2,730) for EVs and plug-in hybrids or 15,000 yuan ($2,073) for petrol cars with an engine smaller than two litres.
(The Chinese EV industry receives a complicated range of subsidies, read more in Carbon Brief’s Q&A on the sector.)
What is the impact?
Xinhua says that the trade-in scheme boosted sales of cars in 2024, with new energy vehicles (NEVs, mainly EVs and plug-in hybrids) accounting for more than 60% of the new vehicles bought under the initiative in 2024.
Meanwhile, products certified with the “highest energy-efficiency level” made up more than 90% of sales by revenue under the home appliance trade-in scheme, adds the report.
An analysis by Goldman Sachs says the trade-in subsidies have “accelerated” the rising share of NEVs in Chinese car sales. It says the policy will help raise the NEV share from 48% in 2024 to about 60% in 2025.
Subsidies for NEVs under “two new” have amounted to 90bn yuan ($12bn), accounting for about 60% of the total “trade-in money”, according to Goldman Sachs.
In his 2024 analysis for Carbon Brief, Lauri Myllyvirta, lead analyst at the Centre lead analyst at the Centre for Research on Energy and Clean Air (CREA), wrote that the trade-in subsidy scheme would “free up household cash for other types of spending, but it also directs household spending in the most energy-intensive direction”.
He tells Carbon Brief that the policy, after the 2025 expansion, is still a “much more limited measure than the kinds of income transfers that would be needed to substantially boost the role of household consumption in driving economic growth”. He adds:
“[It] targets the most energy-intensive part of household spending, purchases of energy-intensive manufactured goods, while leaving out spending on services and other less energy intensive sectors.”
Lynn Song, chief economist for Greater China from market research firm ING, tells Carbon Brief that it is “hard to quantify [the impact of ‘two new’] until we have more specifics rolled out such as what level of subsidies will be applied”. He says:
“The 300bn budget for the programme sounds a little small at first thought – under 1% of total retail sales last year – but it will boost sales beyond the 300bn [yuan] spent, so it should result in a fairly significant bump in my view.
“Looking at last year’s performance once the policies started ramping up in the second half of the year, we saw autos and home appliances easily outperform the headline retail sales growth.”
Song adds that the trade-in subsidies under “two new” can “lead to improved demand for these categories this year”.
In his 2024 interview with Carbon Brief, Bai called the “two new” a “sign” of the government using policy support to stimulate lower-carbon consumption. He added:
“Another vital policy is the ‘guidelines to ramp up green transition of economic, social development’… It is a blueprint of China’s transition in industry, building [construction], transportation, energy and many other areas. Together with the ‘two new’, which is an implementation document for this top-level design, we now have both a direction and a manual for the energy transition.”
The guideline aims to “achieve ‘remarkable results’ in the green transition” by 2030 and establish a “green, low-carbon and circular development economic system” by 2035.
(Read more about the guideline in China Briefing.)
An official release says that the “two new” policy “saved about 28m tonnes of standard coal and reduced carbon dioxide [CO2] emissions by about 73m tonnes” in 2024. It says the “effect” of supporting the low-carbon transition was “obvious”.
The post Q&A: How China’s ‘two new’ policy aims to help cut emissions appeared first on Carbon Brief.
Q&A: How China’s ‘two new’ policy aims to help cut emissions
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Amid reports that the government could weaken the UK’s electric vehicle (EV) targets, Carbon Brief analysis reveals the nation’s EV drivers are saving more than £1,100 a year in fuel costs, compared with running a petrol car.
Battery EVs (BEVs) are roughly four times more efficient than combustion-engine cars, making them far cheaper to run – particularly since the Iran crisis caused a spike in fossil-fuel prices.
The savings from driving BEVs are also more than three times higher than for “plug-in” hybrids (PHEVs), which evidence shows are mostly driven with their combustion engines.
In total, the more than 2m BEVs, 1m PHEVs and 100,000 electric vans on UK roads are saving drivers around £3bn a year, Carbon Brief’s analysis shows, as illustrated in the figure below.
In addition, these EVs are avoiding the need for nearly 2.5bn litres of fuel and cutting carbon dioxide (CO2) emissions by nearly 7m tonnes each year.
Despite recent news that EVs are now cheaper to buy than petrol cars, as well as having far lower running costs, BBC News says the government is “set to water down” its EV sales targets.
The broadcaster explains that the current goal, under the UK’s “zero-emissions vehicle” (ZEV) mandate, is for 80% of new car sales to be BEVs by 2030.
It says that the government is set to consult on weakening this to between 50% and 70%, following “lobbying” by carmakers and trade unions.
According to the Sunday Times, prime minister Keir Starmer “is understood to have overruled the energy secretary [Ed Miliband] after sustained pressure from industry, the Unite union and Peter Kyle, the business secretary”.
The car industry has consistently claimed there is insufficient demand for BEVs to meet the targets under the ZEV mandate, yet the government says manufacturers have “over-complied” to date. Independent analysts say the industry is on track to continue beating the ZEV mandate goals.
The industry has been able to beat its targets by using a wide range of “flexibilities”, which were introduced after a previous round of lobbying. These allow carmarkers to meet part of their EV targets by selling more efficient combustion cars, such as hybrids and plug-in hybrids.
The ZEV mandate is the single-largest part of the government’s plans to meet its legally binding climate goals over the next decade.
The advisory Climate Change Committee (CCC) previously warned that the extra flexibilities would result in a larger number of hybrids being sold, at the expense of battery EVs.
When it consulted on the ZEV mandate in 2023, the then-Conservative government noted that PHEVs do not deliver the cost and CO2 savings they are advertised with.
It pointed to “dramatic” differences between the performance of PHEVs in test cycles and what they deliver under real-world conditions.
In practice, less than a third of miles driven in PHEVs are fuelled by electricity, with petrol making up the rest. As a result, cost and CO2 savings from BEVs are three times larger than for PHEVs.
The post Analysis: UK’s EV drivers are now saving £1,100 each a year – and £3bn in total appeared first on Carbon Brief.
Analysis: UK’s EV drivers are now saving £1,100 each a year – and £3bn in total
Civil society groups have called for an investigation into the first carbon credits approved under a new UN mechanism, alleging the project is linked to Myanmar’s military junta – which the UN says is guilty of human rights abuses – and has “massively” overstated its climate impact.
The programme, which aims to cut emissions by distributing efficient cookstoves across Myanmar, received approval to issue around 650,000 carbon credits from the Article 6.4 Supervisory Body in February, in a landmark moment for the Paris Agreement’s carbon market. Only two projects have been given the green light by the mechanism’s regulator so far.
But two reports published last week, led by the Global Forest Coalition and Brussels-based NGO Carbon Market Watch, raised serious concerns about the project’s implementation in conflict zones where civilians have faced airstrikes and mass displacement as well as its emission-reduction calculations.
Project continued after military coup
Myanmar has been ravaged by a brutal civil war since the country’s military overthrew the democratically elected government in a coup d’état in February 2021. The military regime has attacked civilian populations, persecuted ethnic minorities and committed widespread sexual violence, among other serious human rights violations, the UN Special Rapporteur on the situation of human rights in Myanmar said in April.
The cookstove programme started in 2018 under the previous UN-run carbon offsetting scheme – the Clean Development Mechanism (CDM) – as a partnership between Myanmar’s Ministry of Natural Resources and Environmental Conservation (MONREC) and the Climate Change Center (CCC), a South Korean NGO, with investment from private South Korean firms.
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The project continued operating after the coup. For most of the period between 2021 and 2022 in which the issued credits were generated, MONREC was led by Colonel Khin Maung Yi, who was sanctioned by the European Union in 2021 for supporting the military regime, the Global Forest Coalition report said.
CCC acknowledged engaging with government authorities after the coup but said this “should not be interpreted as political endorsement” of the junta. The South Korean NGO added that abandoning the programme when political circumstances changed “would not necessarily have been the most responsible outcome for the households involved”.
Conflict prevents on the ground verification
The Global Forest Coalition report raised particular concerns about the project’s implementation in Myanmar’s central Dry Zone, including Sagaing Region, an anti-junta resistance stronghold that has been most heavily affected by the conflict and routinely targeted by airstrikes and violent attacks. The region accounts for more than a third of Myanmar’s 3.8 million internally displaced people.
The NGOs said that, in addition to ethical concerns about carbon credits being produced by the military government in an area actively affected by its attacks, this raises questions over the ability to effectively verify the climate integrity of the projects.
Before carbon credits are issued, external auditors need to validate the claims made by project developers and confirm that the emission reductions claimed are correct. This process usually includes site visits to a representative sample of households to check how the improved cookstoves are being used.
But, because of the “volatile political situation” in Myanmar, the auditing team was not able to leave the capital Yangon and could only speak to project participants remotely via Zoom, project documents show.
“Due to ongoing armed conflict on the ground, the data currently used to justify carbon credit issuance in Sagaing by the Burmese military junta is unverifiable and highly likely fraudulent,” said Zaw Tuseng, founder and president of the Myanmar Policy Institute, which contributed to the report, in a written statement. “This demands an immediate suspension of credit transfers until a neutral, conflict-sensitive audit can be conducted.”
“Exceptional circumstances”
CCC told Climate Home News that, although it recognises that on-site verification is “generally preferable, particularly in complex operating environments”, the decision to opt for remote controls was not taken “as a discretionary shortcut, but as an approved alternative under exceptional circumstances”.
The South Korean NGO added that it reviewed the feasibility of the project at community level “on an ongoing basis” and it “did not identify conflict-related incidents that directly affected project implementation activities in participating communities during the monitoring period”.
A spokesperson for the UN climate change body told Climate Home News that, when site access is not possible, the UN carbon credit mechanism allows for “alternative verification approaches while still maintaining conservative assumptions and environmental integrity safeguards”. “These provisions ensure that crediting can only proceed where evidence is reliable,” they added.
Contested methodology
Carbon markets are seen as an important channel to raise money to help low-income communities in developing countries switch to less polluting cooking methods, both reducing CO2 emissions and improving air quality. But several cookstove offsetting projects have faced criticism from researchers and campaigners who argue that climate benefits are often exaggerated and weak monitoring can undermine claims of real emission reductions.
The project in Myanmar uses a contested methodology developed under the earlier Kyoto Protocol that was rejected last year by The Integrity Council for the Voluntary Carbon Market (ICVCM), a watchdog that issues quality labels to carbon credit types, because it found it “insufficiently rigorous”.
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After transitioning from the CDM to the new mechanism, the project was required to apply “more conservative” assumptions to calculate emission reductions, which resulted in 40% fewer credits being issued, according to the UN climate change body.
“The result is consistent with environmental integrity requirements and ensures that each credited tonne genuinely represents a tonne reduced and contributes to the goals of the Paris Agreement,” Mkhuthazi Steleki, the South African chair of the Article 6.4 Supervisory Body, which oversees the mechanism, said in February.
Too many credits issued
But Carbon Market Watch claimed in a second report last week that, despite the adjustment, the project is still likely to issue seven times more credits than its real climate impact justifies, comparing its calculations with values from peer-reviewed scientific literature.
The biggest driver of the credit inflation, the group said, is the failure to account for “stacking” – the widespread practice of households using multiple stoves at the same time, including more polluting ones the project does not monitor.
Peer-reviewed science considers a stacking rate of 68% a conservative assumption, but the methodology used by the Myanmar programme makes no allowance for it at all, the report said.
CCC disputed those findings. In a written response to Climate Home News, it said the project was developed under methodologies approved within the UN climate framework and that external recalculations by researchers are not “determinative of the level of crediting achieved”.
The credits are expected to be used primarily by major South Korean polluters to meet obligations under the country’s emissions trading system – a move that will also enable the government to count those units toward emissions reduction targets in its nationally determined contribution (NDC), the UN climate body told Climate Home News.
Myanmar will use the remaining credits to achieve in part the goals of its own national climate plan under the Paris Agreement.
“Over-crediting, at any magnitude, cannot be compatible with the climate ambition of a world striving to limit global warming to 1.5ºC,” said Isa Mulder, an expert at Carbon Market Watch.
The post UN’s first Paris Agreement carbon credits face human rights and climate concerns appeared first on Climate Home News.
UN’s first Paris Agreement carbon credits face human rights and climate concerns
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